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sunil duggal: Lower input prices to lift Vedanta’s margins this fiscal: CEO Sunil Duggal

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Vedanta Ltd, which reported a significant drop in margins in FY23, expects operational efficiencies under implementation to boost bottom lines in the current fiscal. CEO Sunil Duggal told Nikita Periwal in an interview that efficiency measures along with the demand for commodities remaining strong can help the company’s margins move back in the range of 35%-38%. Edited excerpts.

What is the outlook for operating margins in FY24, given that margins in FY23 at 28% were lower than that in FY22?

FY24 is going to be much better, helped by levers in most of our operations. Both coal and fuel costs play a very big role, as do input commodity prices. If you look at coal prices in quarter one now as compared to quarter one last year, it has softened.

Fuel prices have also softened, which will also play a major part. Prices of other commodities have also softened. As for internal levels, Lanjigarh, once commissioned, will bring down costs by $30-$50 per tonne. In our steel business at Electrosteel, we purchase some coke from the market.

We are commissioning the coke oven plants this quarter, which will help us meet the entire coal from our production, so this will bring down costs by another $10-$15 per tonne. There are other efforts across our portfolio to integrate operations as well, and I think margins should be somewhere in the range of 35%-38% for this year.

What are the focus areas for the $1.7-billion capital expenditure planned for FY24?

One of the biggest levers for cost compression and vertical integration is the aluminium business where we feel there is scope to grow the contribution from the business in the overall pie. In the aluminium business, Lanjigarh will be commissioned, and we want to integrate its operations with the Sijimali (bauxite) mine that we won in the auction. The second focus is to operationalise coal mines. Jamkhani has already been operationalised, and we want to operationalise Ghogarpalli and the Barra mines. Even if one of these mines is operationalised this year, it will give us coal security, which will bring down costs. We also want to add value-added products. For zinc, we will work on some de-bottlenecking at Hindustan Zinc, where we want the capacity to go to 1.2 million tonnes as soon as possible.

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